Our intuition says that if we are in a situation where the demand for our systems is too high, our response should be focus on increasing our capacity to produce more or on increasing our efficiency to produce faster. I'm convinced that the only reason we do that is because we don't want to deal with the challenges of the real leverage on these situations: reducing demand. Actually, there are indicators that acting to increase capacity in producing has an immediate backward effect on demand, making it increase even more than before.

For many decades, this phenomenon is recognized by road traffic engineers. The fact is when we increase the capacity of any transportation system there is a medium term associated effect that makes demand grows. Researches suggest that when the travel time reduces in 1% we will have an increasing 0.5% in traffic volume in the first year. In the following years this rate will trend to grow gradually until it reaches the proportion of one to one. People change their routes to use the new capacity, they move to places far away from downtown because transportation becomes viable, they stop doing things to avoid traffic, like traveling in a specific timeframe or they simply buy more cars (almost one for each family member). So, what is the point in increasing capacity in traffic if the long term effect of this is to perpetuate inneficiency?

What is the purpose of a transportation system? If it is to carry as many people as possible for one point of the city to another, then the strategy of putting more busses and cars on the streets and building more roads can be considered valid. But I don't think that is what we want. Anyway, problems in traffic are much more complex that we think and that is just one of the elements to consider. 

Knowledge workers can learn with this and apply similar concepts to deal with the common reality of having too much demand and low capacity to answer it. Kanban is a method that encourages people to reflect constantly on the relationship between demand and supply. One of the acknowledged results of using Kanban is a system design which balance demand against throughput. 

I believe the "Induced Demand" phenomenon on knowledge work is even more present. The system as a whole suffers too much because of high demand pressure. This happen when you are doing services, maintenance, or product development. Large backlogs for products in development are buffers that make it less responsive for reaching purpose. Services systems with high levels of demand don't scale without a huge rate of failure and customer disatisfaction.

Some things to reflect on this regard:

  • Review purpose: What is the purpose of your system? Frequently we blindly answer customer requests without questioning too much. Customer aren't usually thinking about the whole system when they ask for things. They have their own interests. As the supplier, you should be able to questioning every single request. Filtering, prioritizing and selecting what is really going to generate value for the whole. For example, actions that could be taken to reduce demand are rarely considered because they don't come from customers. However they have high impact on the system as a whole, specially in medium and long term. 
  • Restrictions on accepting demand induce creativity in knowledge work. In software development, for example, it is too easy to have ideas for features. Backlog grows and with that the sensation that the system is slow to produce. Don't make it easy to add an item to the backlog. Don't manage dozens of "to do" items. Focus not only on discovering the best features to build, but also on discovering why those features shouldn't be built in the first place.
  • Use economics on your favour: Make demand with low value for the system cost more. This will decrease demand immediatelly. In organizations, think about economic games to handle with disputes for system capacity.
  • Create awareness: if you and your customers are in the same organization, help them to understand the effects of having too much demand. Try to raise budget to explicitly execute strategies for demand reduction.
  • Don't increase capacity without having an associated plan to reduce demand on similar rates. 
  • Keep your eyes on demand. Always. There are a lot of levers there. Some of them are huge.

Knowledge work systems running under high demand rates are usually poor in quality. In such systems, excelence is not an option. They demotivate people and take customers to an eternal state of disatisfaction, no matter how hard you work to look efficient.

Posted by: alissonvale
Posted on: 8/25/2013 at 9:06 AM
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